Why we should be business-friendly, and what makes a 'true friend'

With ministers spinning like duplicitous tops striving to show they are friends of business while simultaneously seeking electoral cheers for being beastly to bonus-takers, it is worth thinking what makes a 'true friend'. And how politicians can gain electoral advantage by actually being true friends of business. After all, a true friend helps you live up to your highest potential, not to indulge your basest instincts. The first thing is to expose the fallacy that if excellence brings rewards, then those who are rewarded must be excellent. Examples to the contrary abound, so you would have thought this would be an easy exposé.


Fred Goodwin got away with his multi-million pound severance rewards in spite of ruining the bank he ran because his contract said he could and, according to Lord Myners, the RBS board "bent over backwards" to ensure he did. Stephen Hester won his £1million bonus (which he was forced to decline by public opinion) in spite of the miserable performance of the bank he runs because, he said, the miserable state was his predecessor Goodwin’s fault and not his. Millions paid for Goodwin’s failure and for Hester’s lack of success. 

Although Hester was forced to decline his bonus, the RBS 2010 Annual Report shows he is still due to receive his 'long term incentive award' which is worth more. In any case, it is reported that he has already collected £11million since joining RBS in 2008. So no need to shed any tears. Asked by James Naughtie, of BBC Radio 4's Today Programme, whether he would work less hard if he was only paid his basic salary of £100,000 a month (£1.2million a year), Hester conducted a masterclass in slipping around the question. Confirmation that the greasy pole is still lubricating the highly compensated executives clambering up it.

So what does being ‘business friendly’ actually mean?  We are told by ministers and lobbyists that it is about keeping business regulation light, operating costs low, and executive pay high. But is that true? And surely it is not ‘business’ that is our national goal but ‘prosperity’. Business is undoubtedly one route to prosperity, but turning the route into the goal is like a premier league footballer pulling his shirt over his head in celebration before he gets to the half-way line instead of waiting until the ball is in the net. 

Business is not short of friends. The Confederation of British Industry, “the UK's top business lobbying organisation”, whose “lobbying and campaigning helps keep business interests at the heart of policy in Westminster”, is remarkably effective at keeping business’s pals in line. And successful in redefining what ‘success’ is. John Cridland, CBI Director General, said

"The whole football team knows that their performance requires one or two star players, and I think it's the same with a board of directors…..That is why some payments will be high but they should only be high if they are for the equivalent of a goal scorer in the Premier League."

Cridland seems to follow the ‘celebrate at the half-way line’ philosophy, with remuneration committees of major UK companies setting bonus targets at achieving average (median) performance (i.e. they only have to perform at or above the average for their sector to get their huge bonuses). Nonetheless, the CBI successfully gets its business pals to stand obediently in line:

• The Financial Services Authority (FSA), and its successor the Financial Conduct Authority (FCA), provides the weak regulation in the financial sector with fines mere peppercorns compared with profits. Should we be worried that the ‘new’ FCA copied the discredited FSA’s goal for consumer protection: to secure “an appropriate degree of protection for consumers”.  Appropriate for whom?
• The courts enforce the weak consumer protection law as defined by our parliament, which effectively allows half of consumers to be duped quite legally.
• The politicians provide strong words where they can’t do anything (it is shareholders’ responsibility to control runaway pay), and weasel words when they can (declining to vote our shareholding against bumper remuneration in RBS and Lloyds Banking Group claiming it would be 'interfering')

Low business costs, weak regulation, and high executive pay are certainly “business friendly”, but are they “prosperity friendly”?

When the banks say greater regulation would impose higher costs, they mean that part of their profits would ‘leak’ to other people – those who are needed to put the regulation in place, from accountants and computer systems staff to the catering and cleaning staff who have to feed and clean up after the extra accountants and computer programmers.

When they say ring-fencing the banks will drive up costs, they mean that if they can’t use their retail depositors’ savings, paying them virtually zero interest, to fund their investment bank they would have to pay more for their funds.  “Pay more” means paying their retail depositors (that's you and me) more interest on our savings.

When they say high executive pay is needed to attract “premier goal scorers”, their claims are a miasma of fibs, smoke and mirrors. Click on each to see the reality:

• Are exceptionally bright?
• Have the talent to perform consistently excellently?
• Be prepared to take risk, and be prepared to pay the price when it goes wrong?
• Prevent them being seduced overseas by even higher pay?
• Provide great returns to shareholders?
• Provide excellent service to customers?

Consider the claim that highly paid executives take high risks. Executives in the big companies rarely risk substantial quantities of their own assets. They risk their shareholders’ money, their employees’ livelihoods, and their customers who rely on whatever goods or services they provide. The mere fact that they are overly bonussed means that even being fired is not a risk as was demonstrated by the comfortable retirement of many senior bankers including Mr.Goodwin. Goodwin’s contract with RBS allowed him to:

• Start drawing his pension at the age of 50, with all payments up to his 60^th birthday being added to the pot by RBS when he was ejected.
• Even though he joined RBS at the age of 40, additional payments were dropped into the pot to cover him from the age of 20.
• His pension was based on not his ‘final salary’, but the salary in any year he chose in the previous decade. (This is important for bankers, whose pay can fluctuate from the exorbitantly high to the ridiculously high)
• He was allowed to keep all the pensions he had accrued for what he actually did between the age of 20 to 40 working for other companies.

Talented executives should be highly paid. But the pay should be enough for them to pay their bills month by month, like the rest of us. Their bills may be much higher - caviar, supercar, paramour - but they should rely on next month's salary to pay for next month's excesses. That way they will nurture their companies like milk-cows which need long healthy lives rather than prepare them for the riskier existence of beef-cows which only need to survive long enough to provide them with their next bonus-steak dinner.


There is no greater driver of rip-offs than offering a lifetime's pay and ‘rewards’ for a year's work. To justify their bonuses executives strive to show more profits. Profits don’t appear from nowhere: they come from the pockets of us ripped-off Britons. If there aren't enough legitimate profits, there are other ways to catch a bonus:

• Payment Protection Insurance
• Savings teaser rates that quietly drop to nothing
• Energy prices
• Rip-off pension fees
• Excessive public transport costs
• etc

Is it thoughts of their million pound bonuses that drive executives to rip out 50% of the value of our pensions with excessive charges, consigning pensioners to poverty? Is it their long-term incentive plans that persuade directors to increase their margins leaving millions in fuel poverty contributing to an estimated 22,000  additional deaths among over 65s in the winter of 2010-11?


It is not just us ripped-off Britons as individuals that are injured. Rip-offs by businesses damage other businesses. Excessive energy costs, extortionate banking costs, extreme travel costs all serve to hamstring British industry. The financial sector offering higher pay, funded by its excessive profits, to computer programmers and accountants pushes up the market rate for all industries who need programmers and accountants. Offering excessive pay tempts in talent which is lost to other industries.


Clearly, being 'business friendly' is not just a matter of giving businessmen whatever they want. No more than being 'child friendly' is just a matter of letting your kids do whatever they want. A certain type of businessman and most children want you to think otherwise. Politicians and parents should know better.


How times have changed. As little as 30 years ago, the directors of the main British companies earned around 15 times more than the average member of staff. Now, according to the High Pay Commission, they take many times more. Were the corporate titans of 1980 so much inferior to their successors today?

The wealth of the nation continues to grow, and yet everyone has been taken in by the fallacy that the nation cannot afford to pay for public services such as health, education, defence, and policing. The nation has been gulled into believing that final salary pensions are not affordable, and that everyone will have to work until they are much older. The reality is the share of GDP going in pay and pensions is actually dropping. And yet Ripped-off Britons are being persuaded that they must expect even less.

The wealth is there, but a greater share of the nation's wealth is being confiscated by the wealthy.

And it is being done under the pretence that the current  tawdry version of “Business Friendly" is the same thing as “Prosperity Friendly”. 


Which it isn’t.